In practical economic activity, it is important for business entities not only to correctly and comprehensively measure inflation, but also to correctly assess the consequences of this phenomenon and adapt to them. In this process, structural changes in price dynamics are especially important.
Specifics of the situation
With "balanced" inflation, product prices rise, while maintaining the same ratio. In this case, the relevance of the situation in the markets of goods and labor. When balanced, the income level of the population does not decrease, despite the fact that the value of previously accumulated savings is lost. With an unequal ratio, redistribution of profit occurs, structural changes take place in the sphere of production of services and goods. This is due to an imbalance in price fluctuations. Particularly rapidly increasing the cost of everyday goods of inelastic demand. This, in turn, leads to a decline in the quality of life and increased social tension.
Way out
The negative consequences of the unbalanced situation with prices require the leading apparatuses of various countries to conduct a coordinating policy. At the same time, analysts are trying to figure out which is better: adapt to the existing situation or develop programs to eliminate it. In different countries, this issue is resolved in different ways. When analyzing the situation, a whole complex of specific factors is taken into account. For example, in England and America at the government level, priority is given to the development of liquidation programs. At the same time, in other states the task is to create a set of adaptation measures.
Keynesian approach
Analyzing measures of anti-inflationary economic policy, two approaches to solving the problem can be distinguished. One of them is developed by modern Keynesians, and the second by followers of the neoclassical school. In the framework of the first approach, anti-inflation measures of the state come down to maneuvering taxes and expenses. This provides an impact on solvent demand. Due to this, inflation is undoubtedly halted. Anti-inflationary measures of this nature, however, also negatively affect production, reducing it. This can lead to stagnation, and in some cases to crisis phenomena, including an increase in unemployment. The expansion of demand in the recession phase is also achieved through fiscal policy. To stimulate it, tax rates are reduced, and investment programs and other expenses are being introduced. First of all, low tariffs are set for those who receive low and medium incomes. It is believed that this way it is possible to expand consumer demand for services and goods. However, as practice shows, such anti-inflationary measures can only worsen the situation. In addition, the ability to maneuver costs and taxes is significantly limited by budget deficits.
Neoclassical theory
In accordance with it, financial and credit regulation comes to the fore. It flexibly and indirectly affects the current situation. It is believed that anti-inflationary measures by the government should be aimed at limiting effective demand. Adherents of the theory stipulate that stimulating growth and maintaining employment artificially by lowering the natural rate of unemployment leads to a loss of control over the situation. This program is carried out today by the Central Bank. Formally, he is not under government control. The Bank influences the market through changes in the circulation of the amount of money and interest rates on loans.
Adaptation Programs
Under the current market regime, it is impossible to eliminate all inflationary factors (monopolies, budget deficits, imbalances in the economy, expectations of entrepreneurs and the public, and so on). That is why many countries, instead of trying to eliminate the situation, are completely trying to moderate the crisis, to prevent their expansion. Today, it is most advisable to combine short-term and long-term anti-inflationary government measures. Let's consider them in more detail.
Long-term program
This system of anti-inflationary measures includes:
- Weakening the influence of external factors. In this case, the task is to reduce the inflationary impact on the economy of overflows of foreign capital. They appear in the form of short-term loans and loans to repay the budget deficit.
- Establishing tight limits on annual money supply growth.
- The reduction of the budget deficit, since its financing by providing loans to the Central Bank leads to inflation. This task is realized by reducing costs and raising taxes.
- Fulfillment of expectations of the population, pumping current demand. For this, clear anti-inflationary policies must be developed to gain the trust of citizens. The country's leadership should promote the effective functioning of the market. This, in turn, will positively affect consumer psychology. In this case, anti-inflationary measures include price liberalization, stimulation of production, the fight against monopolization, and so on.
Short term program
It aims to temporarily slow inflation. In this case, the required expansion of aggregate supply without increasing total demand is achieved by providing certain benefits to enterprises engaged in the production of by-products and goods in addition to the main production. Part of the property can be privatized by the state, which will provide additional inflows into the budget. This greatly facilitates the solution of deficit problems. In addition, the short-term state system of anti-inflationary measures reduces demand due to the sale of large shares of new companies. The growth in supply is facilitated by the import of consumer products. A certain influence is exerted by an increase in interest rates on interest rates. It raises the rate of savings.
Anti-inflation measures in Russia
For several years, the Central Bank, together with the Ministry of Finance, conducted a deterrent program. It consisted of ruble borrowings and the subsequent successive decrease in the liquidity of the dollar in the domestic market. As practice has shown, such a system of anti-inflationary measures failed to ensure price stability. Moreover, their implementation is extremely dangerous for the country. Investing in real production has become an extremely unreasonable way out of the situation. However, the money that was squeezed out of enterprises found a different direction. So, there was a significant increase in the value of real estate, an increase in sales of luxury goods and other expenses. Along with this, the profitability of "hot" capital, repeatedly announced by the Central Bank, significantly changed the motivation of investors. It has become very profitable to convert foreign currency into rubles. The sphere of financial intermediation began to develop intensively. Today in this sector there are maximum salaries that are not accompanied by commodity filling. At the same time, the dependence of financial companies on external sources increased. The function of the national currency at the same time began to boil down only to servicing the exchange of goods between importers and operations in the stock markets. Although the ruble was supposed to provide settlement relationships between domestic contractors and customers. The national currency, therefore, has become virtually unclaimed in the Russian economy and subject to inflation.
Promising areas
Many experts see an effective fight against this situation in stimulating economic growth. This path involves the use of natural, and therefore reliable, regulatory tools. When additional funds become in demand in the domestic market, an entrepreneur will always find the opportunity to borrow money from a bank in his own country or abroad. At the same time, the exporter will voluntarily convert the profits into national currency. If there is an abundance of money in the economy, it will be directed to bank deposits or foreign investments. The task of the issuing center should be to keep interest rates at a given level to prevent large fluctuation amplitudes in the credit market. However, analysts note that such a situation in Russia is possible when the Central Bank becomes a "net creditor" for commercial banks. In this case, he will be able to dictate price conditions, and not be dependent on the market. Borrowing by the Central Bank itself will also be necessary. However, they should be aimed at removing temporary excess liquidity. Net lending will thus guarantee the profitability of open market operations. This, in turn, will provide the necessary anti-inflationary effect.
Government loans
They artificially raise rates and negatively affect the financing of the real economic sector. Along with this, government loans require interest payments in favor of investors. As a result, they form a double crisis effect. First of all, loans slow down supply growth, and secondly, increase solvent demand. With the complete cessation of borrowing, resources will be freed to strengthen commodity production.
Taxes
The development of domestic business is significantly hampered by excessive government intervention in its activities, reporting and numerous inspections. According to experts, the biggest problems are created by the tax system. A number of authors propose to exempt from all fees, except those that are motivated by public services, medium and small businesses. With this relief, there will be no significant budget losses, however, this will partially abolish the non-market principle of interaction between the government and entrepreneurs. Such anti-inflationary measures will allow the business to fulfill the social task assigned to it, which consists in replenishing the shelves with products and providing citizens with work and salaries. When exempted from taxes, the business will be removed from the shadows. These anti-inflationary measures will serve as a powerful incentive for the development of the production sector.
Additionally
In addition to those described above, experts suggest using other anti-inflationary measures. They should be such that obtaining the effect from them does not require long preparation. Among them, in particular, analysts propose introducing approximate prohibitive duties on energy exports. This will ensure the country's raw material security in the long run, replenish domestic markets with fuel, and increase competition. This, in turn, should lead to lower prices.
Conclusion
Today, inflation is considered one of the most dangerous and very painful processes. It negatively affects the financial and business sectors. Inflation is not only a decrease in the purchasing power of funds. It destroys the mechanisms of economic regulation, nullifies all the efforts made in the process of carrying out structural transformations, and leads to unbalanced markets. The nature of the manifestation of inflation may be different. Processes cannot be considered only as a direct result of certain actions of the country's leadership. Inflation is caused by deep distortions in the economic system. It follows from this that its entire course is not random, but rather stable. In this regard, the development of anti-inflationary measures is becoming the main task of the government today.
As mentioned above, crisis management programs involve long-term strategies. However, they become effective only when the inflationary expectation of society is quickly repaid. To solve this problem, it is necessary to develop programs to strengthen market mechanisms and the confidence of most citizens. As a mandatory measure to curb inflation, of course, should reduce the budget deficit. It should be remembered that all programs will be effective only if the production sector is developed and stimulated at the same time. A decrease in money demand can be achieved by strengthening the commodity market, the ability to invest in stocks, and the organization of reasonable privatization. As a result, conditions will be formed to maintain the lowest inflationary rates. They will not be able to significantly affect the
market mechanism and interfere with the normal development of the country.